Industry bodies share insights for 2024
Catherine Albertyn
Lelané Bezuidenhout
In 2024, there are bound to be challenges and opportunities for intermediaries and the industry in general.
FAnews spoke to a few industry bodies/associations who weighed in on the year 2024.
2024 is going to be a difficult year
While we believe the election in 2024 will put the brakes on the issue of the Conduct of Financial Institutions (COFI) Act and other major pieces of legislation, Ronald King, Vice President of the Financial Intermediaries Association of Southern Africa (FIA) and Chairman of the Regulatory Executive Committee of the FIA said the preparation of subordinate legislation will continue at break-neck speed, resulting in a regulatory tsunami in 2025. “The election, in itself, will increase clients’ fears, and advisers should expect to field many more calls from concerned clients.”
“While financial market volatility is likely to increase before the election, we do believe that any positive results will boost the Rand and strengthen local markets. On the non-life insurance side, the political turmoil that precedes an election might increase the risk to our clients, and our members should, therefore, ensure that risks are correctly covered,” he said.
“In short, we believe 2024 is going to be a difficult year, and one that again proves the value of a good adviser and broker. The role of the intermediary is crucial in building wealth and transforming the economy. Our challenge remains to evolve from a fractured industry – where individual entrepreneurs focus on their own businesses – to one where we collaborate on important issues. If we do not unite to decide how our industry should look – and how it best contributes to the economy and society – others will decide on our behalf. In my opinion, the FIA will be instrumental in leading this discussion,” he continued.
For our industry to survive, King mentioned that we need to develop new markets and encourage younger advisers to enter the financial and risk advice profession. “As such, all intermediaries should become more involved in non-advice areas such as consumer education, mentoring and skills development. And again, it does not help for each intermediary or advice practice to storm off in its own direction. We need to collectively identify worthwhile projects and make a difference by all getting involved.”
In his concluding remarks, he said, “The future is coming sooner than we think. With Artificial Intelligence (AI), Large Language Models (LLMs) and the metaverse you can forget about your neighbour being your only competition. As intermediaries, we need to determine what our value add is, and focus on that to the exclusion of everything else. If you are not as efficient as you can be, the competitive landscape of the future will devour you.”
Tough reinsurance renewals
Catherine Albertyn, President of the Gauteng Women In Insurance (GWII) and Partnerships Manager at The Garrun Group agreed, saying she doesn’t foresee 2024 being any easier than 2023. “I think we’re in for another round of tough reinsurance treaty renewals in the early part of 2024. The continuing energy crisis in South Africa, the Israeli-Palestinian conflict, War in Ukraine, adverse weather conditions and many other factors will play into this continued hard insurance cycle. The market will continue to see reduced capacity with cover restrictions making it challenging to secure cover.”
“We need to start ‘thinking out of the box’ and collaborating more with our clients and other industry players - traditional methods of insurance are no longer going to cut it. Insurers have access to limited capacity and are shying away from high-risk placements. An example of this is cover for thatch risks - following the fire at Mabalingwe in September 2024 - large concentrations of thatch have become almost uninsurable in the local and international markets. We need to become creative about insurance, looking for ART (alternative risk transfer) methods such as Parametric Insurance arrangements. Clients are going to require tailor-made solutions where they retain some of the risk which is then mitigated by these ART’s. They provide the client with rapid liquidity following an insured event and whilst sounding complicated are very straightforward- improving risk transfer for all parties involved,” she added.
Intermediaries, she emphasised, are going to be key in setting up these arrangements in consultation with their clients. “Excellent knowledge of the risk, mitigation options and positive client relationships will be required - intermediaries can no longer operate as just the ‘middleman’ - additional skills are necessary to provide your client with the solutions they need.”
“My advice on navigating these uncertain times? Embrace the challenges and the opportunities to learn and be creative. We have entered a new era where you must adapt to remain relevant, and this creates the opportunity to reinvent insurance as we know it. There will be new role players in our businesses that we consult and bring into our teams - those that do this well will flourish,” she concluded.
Challenges and opportunities
In 2024, “intermediaries and the financial industry face both challenges and opportunities. With a focus on stabilising debt and debt-servicing costs, financial advisers can guide clients through economic uncertainties. The rise in consumer inflation to 5.9%, near the upper limit of the SARB’s target, may lead to potential interest rate hikes in Q1. Then, the accelerated implementation of the Two-Component (Pot) System from March 2024 presents challenges for financial planners, particularly in processing payment requests and navigating potential delays. Lastly, the completion timeline for COFI parliamentary processes remains uncertain, but the FSCA continues its commitment to a three-year regulatory plan, emphasising a shift towards a conduct-based matrix. Intermediaries should, therefore, anticipate continued regulatory shifts and changes,” said Lelané Bezuidenhout CFP®, CEO of the Financial Planning Institute (FPI).
The industry, she added, can significantly improve through effective communication among stakeholders, including regulators, associations, product providers, ombudsman schemes, and clients. “Emphasising the importance of professional financial advice during economic uncertainty is crucial, and utilising advanced technology, such as AI, for more efficient processes is recommended. The industry should focus on achieving Treating Customers Fairly (TCF) outcomes, conducting thorough due diligence checks, managing conflicts of interest, and upholding professional responsibility. Then, prioritising compliance and risk management, along with emphasising good company culture, will enhance the overall corporate governance standards of financial services providers (FSPs). These focused efforts are instrumental in preparing financial institutions for the upcoming COFI matrix.”
Bezuidenhout emphasised that navigating uncertain times in 2024 requires reflection, consistent delivery of results, and proactive client management. “With the Two-Component (Pot) System potentially in place, managing client expectations and communicating potential delays is essential. Prioritising compliance documentation, adopting a meticulous approach to risk management, and aligning with the impending COFI horizon are crucial. And, Continued Professional Development (CPD) is imperative, focusing on personal development plans and aligning CPD hours with defined learning outcomes. Intermediaries must stay informed, adapt to changes, and take responsibility for their role as the primary "product" clients invest in.”
In closing, she said, “2024 is going to be an exciting year filled with challenges that offer growth opportunities. We need to embrace the year with a clear perspective, ensuring our own well-being to effectively support our families and clients who place their trust in us. It's a time for thoughtful reflection and strategic preparation, considering the dynamic landscape of political, economic, social, technological, legal, and environmental (PESTLE) changes.”
Read the full article with more insights from Steve von Roretz, Chairman of the South African Underwriting Managers Association (SAUMA) and Chairman of Leppard and Associates and Viviene Pearson, CEO of the South African Insurance Association (SAIA) as they share their biggest concerns and key issues intermediaries will grapple with, in the February edition of the FAnews magazine.
Writer’s Thoughts
In all these challenges, one certainty emerges - South Africa's insurance industry displays exceptional resilience. Throughout the years, it has showcased remarkable flexibility and adaptability in surmounting numerous challenges, particularly in the aftermath of the pandemic's impact. The upcoming year is poised to follow this pattern. Do you agree? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
